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Humana's 50,000 employees will see higher bonuses after strong quarter

Humana reported second quarter profits of $940 million, thanks to better than expected results in key business lines.

The Louisville-based health insurance giant generated net income of $6.94 per share, plus adjusted earnings of $6.05 per share, results that exceeded targets set by Wall Street and continued a string of strong quarterly performances dating back three years.

The Wednesday report included a slice of good news for the company's 50,000 employees — beefed up performance-based bonuses in the second half of this year across all employee groups.

One reason for the upbeat attitude was the growth in individual Medicare Advantage memberships, where the company expected to add 415,000 to 440,000 new members and instead now project 480,000 to 500,000 members, a 16% growth this year and the best rate posted in the last decade.

Compared with the competition, "people are voting with their feet," Brian Kane, the company's chief financial officer, told analysts during a conference call.

The company's stock price took a jump in mid-July after President Donald Trump signed an executive order designed to trim what the federal government spends on care for kidney patients.

The order, in part, intends to allow Medicare reimbursements for in-home dialysis over facility-based services in hopes of cutting costs starting in 2021. That puts Humana in a strong position because it has a minority interest in Kindred at Home, a home health provider based in Louisville, plus several programs to care for seniors with chronic conditions in their homes.

Bruce Broussard, president and chief executive, said the company is working with the Centers For Medicare and Medicaid, as well as dialysis providers to make care more affordable.

The one note of caution Broussard and Kane mentioned was the return next year of a federal health insurance fee, or HIF, that will cost Humana an estimated $1 billion.

The fee or tax linked to the federal Affordable Care Act was charged to companies in 2018 and lifted this year, with the understanding it would return in 2020. Major insurers, including Humana and UnitedHealthcare, have lobbied Congress in hopes of extending the moratorium on the fee. But so far there's been no action.

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The HIF is projected to increase health care costs by $20 billion for 142 million people. Some insurance companies say that a senior couple would see their premiums increase by about $500 a year, according to Modern Healthcare magazine.

Humana expects "reasonable growth" next year, driven in part by the return of the fee. That will force Humana and other insurers, Broussard said, to trim benefits or increase prices to offset the expense, a theme that's been repeated consistently by health care executives for the last year.

While "we've done all we can to mitigate" the impact, Kane said during the call, "it's a big one and it's nondeductible."